Future of contract regarding Medicaid eligibility in doubt

Tuesday

The biggest plank in a 2012 law designed to save the state $1.6 billion a year and help shore up Illinois’ Medicaid program was a strengthened effort to remove ineligible people from the rolls.

The future and effectiveness of that effort, however, remain in doubt after an arbitrator’s ruling that orders the state to cancel its contract with the governmental consulting company Maximus by the end of December.

The administration of Gov. Pat Quinn hasn’t decided yet whether to appeal arbitrator Edwin Benn’s ruling or hire the estimated 100 additional state workers who would be needed to completely take over the work Maximus has done since January.

“It is important that all relevant facts are considered,” Kelly Jakubek, spokeswoman for the Illinois Department of Healthcare and Family Services, said Monday. “Maximus’ performance at this time is acceptable, and we consider them a good business partner.”

For the largest union representing state workers, the June 20 ruling was the biggest repudiation in years of the practice of privatization. The union says the decision could benefit state taxpayers in the long run when it comes to the efficient operation of a state Medicaid program that costs more than $10 billion a year.

“It’s a really important victory,” said Anne Irving, director of public policy for Council 31 of the American Federation of State, County and Municipal Employees. “We were able to demonstrate to the state how contracting out was very expensive and was risky. … It is to the benefit of the taxpayers to bring the work in-house.”

‘Major setback’

State Sen. Dale Righter, R-Mattoon, and Rep. Patricia Bellock, R-Hinsdale, say Maximus is doing a good job and should be allowed to continue. They wrote a June 26 letter to the Democratic governor asking Quinn to appeal the decision in court.

“Canceling a contract that has been so successful at rooting out waste, fraud and abuse would be a major setback,” the lawmakers wrote. “The state cannot afford to lose momentum on this important review of our Medicaid program.”

The ruling hinged on a single word — “may” — in the 450-page Save Medicaid Access and Resources Together Act.

Officials at Healthcare and Family Services contended that the 2012 law required the state to contract with a private vendor for an effort known as “enhanced eligibility verification.” The project involves aggressively checking the income and residency status of all 2.7 million people on the Medicaid program at least once a year.

No one knew for sure how much the effort might save state government, but lawmakers negotiating the terms of the SMART Act estimated that the eligibility verification could save $350 million annually and should be conducted over a two-year period by a private company, Bellock said.

The Quinn administration took the position that an outside contract was mandated by the General Assembly. But Benn quoted the text of the SMART Act that says the state “may enter into a contract with the vendor.”

Because the state refused to negotiate the issue of subcontracting this “bargaining-unit work” with AFSCME, Benn said the state violated the labor contract and must terminate Maximus’ contract by Dec. 31. What the state might owe Maximus, a publicly traded company based in Reston, Va., is unclear, but the state’s total cost of the two-year initiative has been estimated at $76.8 million.

Mistaken word?

The 39-page decision shocked Bellock. Even though Maximus wasn’t able to officially begin processing verifications until January, seven months into fiscal 2013, early results were encouraging, she said.

And as of July 22, 52,615 cases — representing a total of more than 90,000 people — had been removed from the Medicaid program.

“The bottom line is, in order to sustain the Medicaid program in Illinois, we have to get the waste out of it,” Bellock said.

Bellock said the word “may” must have been inserted into a section of the legislation by mistake. One of the SMART Act’s chief sponsors, Sen. Heather Steans, D-Chicago, agreed.

Democrats and Republicans from both chambers went over the text of the legislation line by line and apparently didn’t catch the mistake, she said.

Steans said a bipartisan committee of lawmakers from the state House and Senate that hammered out details of the SMART Act wanted the eligibility verification work contracted to a vendor because of the belief that a private company could begin the work quicker and have greater expertise, she said.

AFSCME argued in arbitration hearings that having 300 state workers perform Maximus’ work would cost the state, at most, $31.5 million a year. That would be a net savings of $18 million compared with the total cost of using Maximus workers for two years.

100 more workers

The state already had to hire 200 workers, most of them in the Chicago area, to satisfy federal requirements that state civil-service employees make the final enrollment decisions, Irving said.

An additional 100 or so more employees would need to be hired to take over the rest of the work that 500 Maximus employees had been doing, she said. It’s unknown where those employees would be based.

Irving was critical of Maximus’ results thus far, saying the company had high error rates. For example, she said, 28 percent of Maximus’ recommendations to remove cases from the Medicaid rolls were overruled by state workers. And 18 percent of the time, state workers disagreed with Maximus’ recommendations to allow a case to remain on the rolls in its current status.

HFS officials told lawmakers in March that an estimated $150 million would be saved through the Maximus contract in the fiscal year that ended June 30.

“Although the Medicaid rolls need housekeeping, this project is unlikely to be the financial windfall advocates claimed,” Jakubek said.

In total, changes and delays in the implementation of the SMART Act were expected to result in $464 million less in savings in fiscal 2013 compared with the original $1.6 billion estimate, HFS officials said in March.

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